GBPUSD: Pound Falls Against Dollar for the Second Day in a Row

The GBPUSD currency pair was trading down over 41 pips as the bears remained firmly in control of the price. The British pound’s weakness was triggered yesterday after the UK inflation figures for January released yesterday came in lower than expected. The headline CPI print was 10.1%, missing analysts’ expectations of 10.3%. 

On the other hand, US retail sales data for January came in higher than expected, boosting the US dollar against its peers like the Sterling. US headline retail sales expanded 3.0%, beating analysts’ estimates of 1.9% growth, while core retail sales were 2.3% versus the consensus estimates of 0.9%. 

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Investors reacted positively to the US data, which suggests that the American economy is doing much better than expected. The positive retail sales data is a strong signal for the Fed, and many analysts and investors believe the Fed will use the figures to justify keeping interest rates higher for longer. 

As for the British pound, analysts are already predicting that the Bank of England will not raise rates aggressively, given that inflation in the UK is falling. However, annual inflation is still running way above the BoE’s target of 2.0% since it is at 10%. Therefore, the print has a long way to go before we can say that the BoE is done hiking rates. 

Furthermore, the UK economy appears much weaker than the US economy on most fonts, given that inflation in the US is falling despite the surge in retail sales. This shows that consumers are confident about the economy and are willing to spend more. 

Today’s decline in the GBPUSD currency pair pales compared to yesterday when the pound crashed against the US dollar following the release of the US retail sales data. While today’s decline is minimal, investors look forward to tomorrow’s retail sales data from the UK.

The UK retail sales data set to be released tomorrow will play a critical role in how the GBPUSD currency pair ends the week. However, there is a slim chance that the pair can recoup all its losses from yesterday and today. 

*This is not investment advice. 

The GBPUSD currency pair was trading down 41.5 pips (0.35%) as the dollar rallied against the pound.